Please note that due to travel and limited connectivity next week, the report may not be published.
Nitrogen
Urea prices slide further as most major producers have significant inventory to sell
The Iranian attack on Israel this past week raised concerns of a greater conflict breaking out in the Middle East and this might impact urea and other fertilizer prices. This did not materialize and urea prices in fact continued their slide lower across most major benchmarks.
Middle East urea prices fell another 6% this week, now dropping well into the $200s. A sales to Australia, usually seen as a premium market for the Middle East, was done at around $280/t FOB which suggests that we may see lower prices in the coming weeks.
Egypt saw its prices slide down to the $300/t mark from the $320/t price last week. There is limited interest from its usual market in Europe and there were unconfirmed reports of Egyptian sales at $285/t to Turkey.
Brazil was the lone ‘contrary’ urea market this week with increased demand pushing Brazilian prices up a few dollars to just above $300/t CFR. The reasoning behind the rise in Brazilian purchasing is that April buying has been very low so far – only around 150,000t have been booked compared to an April norm of around 400,000t. In the overall context of Brazilian urea volumes this difference is not huge and isn’t enough to send urea prices racing upwards but it does indicate that some Brazilian players are needing to secure some volumes.
Iran remains the big downward driver of urea prices, dragging the floor price lower again this week. Sales at around $250/t FOB Iran were reported and there were suggestions that deals as low $235/t were done. Iran has around 250,000t of urea stocks that it’s looking to sell still this month.
There are reports out of China that the Chinese government is concerned at the scale of possible urea exports and a potential rise in domestic urea prices and therefore may be considering restricting urea exports. This is unlikely to be material in our view, however the speculation may cause urea prices to start to strengthen (or bottom out sooner than would otherwise have been the case). This is a flag to keep watching over the coming few weeks.
The Rand showed this week its weakness to risk sentiment and the Middle East tensions caused Emerging Market currencies like the Rand to weaken against the Dollar. The Rand declined by nearly 2.5% week-on-week and this counteracted some of the decline in the Dollar value of urea. Our import parity cost of urea fell by just under 4% to R6,565/t ex-warehouse in Durban.
Our view is that urea prices probably have not hit the bottom yet but the bottom cannot be far away – the low point for the year is likely to be reached in the coming couple of weeks.
Ammonium sulphate prices have been resilient despite the collapse in urea prices. This week did see granular amsul prices out of China falling by a few dollars. The surge of buying from Brazil seen in urea was also replicated for amsul but nowhere near the volumes needed to really lift amsul prices. Limited availability of Russian ammonium nitrate to Brazil in encouraging buyers to cover some of their non-urea nitrogen requirements with amsul.
As mentioned above, Ammonium nitrate market news is dominated by the export restrictions the Russian AN producers are facing. This is limiting availability of AN in the market but not impacting price because this is the quietest period in the year for AN demand. CAN prices were unchanged as the European season is now essentially over.
Ammonia prices held steady this week with no significant changes in prices in any of the main benchmark locations. The Asian market, which is a good $150+/t lower than the West looks like it may see prices starting to rise as some production issues at a number of Middle Eastern and Asian producers limits availability. With the Western market trading in the mid to high $400s, there would appear to be plenty of scope of Eastern prices to rise without causing major chaos.
Phosphates
Small reduction in DAP prices this week, while MAP holds steady
Both Chinese and Indian DAP prices showed moderate declines of $5-10/t this week as traders continue to market Chinese product aggressively into the major phosphate importing regions. DAP prices in most markets remain in the mid-$500s.
MAP prices were unchanged once again this week, with limited availability balancing out limited demand. The Saudi benchmark MAP price has now been ‘stuck’ between $520-530/t FOB since November last year. The Brazilian MAP price was also unchanged – as was reported on urea, Brazil has increased MAP purchases in the past week as some major importers are starting to feel the effects of lower than normal buying on their inventories.
The Indian phos acid contract price for Q2 has apparently been agreed at $948/t, down by $20/t from the Q1 price of $968/t. The market expected a bigger drop in the phos acid price, given what has been happening to DAP prices. This phos acid price will make DAP production in India, using imported phos acid, marginal at best even with the increased phosphate subsidy. Logically this would push the Indians towards importing more DAP, however this would really need lower DAP prices to be feasible.
Potash
Potash prices are under downward pressure once more
Many of the major Potash markets saw prices edge down by a couple of Dollars this week. It is the same old story with ample potash supply and relatively few serious buyers. Demand for potash is usually at a low point at this time of year anyway.
The Indian annual potash contract price has still not been officially concluded, however there is plenty of chatter suggesting that a price of around $280/t CFR India has been agreed.
Australia’s potash consumption is very similar to South Africa’s – roughly in the 500,000t per year range compared to SA at 400,000t or thereabouts. The Australian potash price however is around $370-380/t CFR compared to the Durban price of just below $330/t CFR. Part of the Australian premium relates to the higher cost of shipping because of the much longer voyage from most origins to Australia but freight only really explains $10-20/t of the Australian premium. The fact that South Africa is able to access potash at a price comparable to Brazil, which imported 13.5 million t last year, is quite an achievement and is certainly a positive for local farmers.
The Durban CFR price for granular MOP was unchanged this week at $327.5/t.
General Market Outlook
Energy prices remain highly volatile in the face of Middle East tensions
The lack of meaningful damage on the back of Iran’s much-anticipated retaliatory strike on Israel last weekend meant that crude oil prices fell markedly early this week. Brent crude fell from $92/bbl a week ago to as low as $87/bbl mid-week. Breaking news this morning (Friday) is that Israel seems to be carrying out strikes on Iranian targets and oil prices are already reacting – with Brent Crude rising above $90/bbl already this morning. Natural gas prices, especially in Europe, have also been rising in response to Middle East events – the European TTF gas price spiked to $10.3/MMBtu earlier this week before retreating to the current $9.7/MMBtu. Gas prices in the USA continued largely unaffected and currently trade at $1.7/MMBtu.
International cereal and oilseed prices maintained their downward trajectory on the CME, with maize down 0.5%, soya down 2.2% and wheat down 2.7% in Dollar terms. The Rand weakened quite dramatically and local yield concerns over the current crop helped push Safex prices up. With white maize at over R5,500/t for May, farmers with a crop are looking at record prices. Of course, prices are this high because of concerns over poor yields following the dry growing period but on paper, farm economics are looking better than they have for a couple of years.
Latest Direct Hedge quotes for Urea and MAP Swaps in USD:
|
